BUSINESS STOCKMARKET

Magners doubles cider profits for c&c…Miller targets premium beer sector…Shepherd neame extends its estate…Footsie index targets record…Diageo has cash to splash

Magners doubles cider profits for c&c

The long, hot summer has ensured that Irish drinks group C&C saw profits from its cider operations double. Magners cider has become highly popular in the UK, helped by a £20 million advertising campaign promoting Magners with ice among the young, professional classes.  Cider profits, which account for four-fifths of operating profits,  in the half year to August frothed up £61m, while the volume of Magners sold bubbled up 264% in the UK and by 85% overall. Happy shareholders welcomed an 85% rise in their dividends.

Earnings per share of 54 euro cents are expected for 2006/07 against 30 cents in 2005/06, rising to 69 cents in 2007/08. “It’s been a great time,” rejoiced Maurice Pratt, chief executive.

Profits fizzed up to 102m (against 49.8m in the same period last year ) in the six months to the end of August 2006 after the successful launch of Magners cider in London and Scotland led to a countrywide  roll out. Total sales rose 27%, given a big push by a 53% rise in C&C’s marketing budget.

Broker UBS Warburg reckons that Magners cider could account for one in every 25 pints sold in the UK by 2010, against the one in 50 forecast for next year.

Meanwhile, Bulmers, the C&C cider brand in Ireland, defied a flat market by posting a 7% sales rise.

The success of Magners has prompted Scottish & Newcastle to put some marketing heft behind a dormant lookalike of Magners cider.

Miller targets premium beer sector

SAB Miller has alerted the market to a hefty rise in beer sales in the teeth of a downturn in the US market. Miller’s lager sales rose 9%, but in the US, as a result of competitor Anheuser-Busch (which makes Budweiser) cutting its prices savagely, Miller brands, including Miller Genuine Draft and Miller Lite, saw sales drop by 3.6%. European sales were up 8%.

Miller is hoping to catch the US drinking trend for premium imported beer by introducing its South American brands such as best-selling Cusqueña. And to cap its rivals, Miller is working on a new chocolate lager for US customers.

Sales grew particularly well in South America, with an 11% rise in volumes. The first full year contribution from Miller’s Columbian acquisition may now be at the higher end of forecasts. Business has even picked up in central America which has been a flat market.

Miller is also pushing itself in emerging markets with its joint venture China Resources Snow establishing itself as China’s biggest brewer in the first half of the year. Asian and African businesses, meanwhile, grew more than 20%.

Miller intends to bring more of its overseas beers into the UK.

Shepherd neame extends its estate

Southeast brewer, Shepherd Neame, turned in a 14% rise in pre-tax profits to £9.87m for the year to end June 2006 on turnover 4% ahead at £95.3m.

Neame’s tenanted estate covers London, Essex, Surrey, Sussex and Kent and the brewer has been spending heavily on it. Last year £13.8m of capital expenditure was made, including £5.8m to buy seven pubs. The current year could see that expenditure rise to £20m, including £900,000 for a new cask-racking plant and more pubs. A re-jigging of borrowing arrangements will result in cost savings of £800,000.

A two-tier, family-controlled share capital structure ensures that Shepherd Neame is proof against any bid other than one approved by the descendants of Percy Beale Neame, the founder, who hold the all-powerful B shares, 68m in issue against 11.46m tradeable shares.

Footsie index targets record

The UK stockmarket has scaled a five and a half year high point, and dealers are looking to hit the FT-SE 100 index level of 7,000 in 2007.   The highest peak in the Footsie 100’s history was 6,930 on the last dealing day of 1999. The market bulls are excited by a high level of bids, actual and speculative. The market bears fear an increase in interest rates, but take hope from the oil price plunge which has kept inflation low and may defer an interest rate hike.

Diageo has cash to splash

There is speculation in the City wine bars, where dealers go to catch up on gossip, that Diageo, the biggest wheel in the spirits business with brands such as Johnnie Walker and Smirnoff, has cash to spare for buying new liquor brands – or return to shareholders. It paid out £1.4 billion to its shareholders via share buy-backs last year and is committed to doing the same thing this year.

With its massive size blocking any bid for Diageo, and with the competition watchdogs hovering to block any big deals in product areas where it has a commanding position, the likeliest high-growth route for Diageo will lie in its Asian operations. And China is the major market of the future to gain access.

© db December 2006